The yen fell the most in eight weeks against the dollar after a report showed demand for overseas assets among Japanese investors is growing, adding to evidence the recession is moderating. Japan’s currency also weakened versus the euro after the Ministry of Finance said the nation’s investors boosted purchases of foreign bonds last week to the highest level in a month. New Zealand’s dollar posted its biggest advance in a month against the yen as Standard & Poor’s raised its outlook on the country’s debt rating. “The interest in playing the carry trade by Japanese investors has been revised, and that weighs on the yen,” said Michael Klawitter, a currency strategist at Dresdner Kleinwort in Frankfurt. “Risk in dollar-yen is to the upside.” The yen declined as much as 1.8 percent to 97.09 against the dollar before trading at 97.01 at 8:34 a.m. in New York, compared with 95.34 yesterday. It was the biggest intraday drop since March 31. The yen may weaken to 100 per dollar by June 30, Klawitter said. The yen depreciated 2.1 percent to 134.63 versus the euro from 131.83. The dollar slid 0.4 percent to $1.3874 per euro from $1.3825. Japanese investors bought 641.1 billion yen ($6.61 billion) more overseas bonds and notes than they sold in the week ended May 23, the biggest net purchases in a month, according to the Ministry of Finance. Investment Trusts Nomura Asset Management Co., a unit of Japan’s largest brokerage firm, reopened its higher-yielding bond fund to new investments yesterday. The net assets of the fund, which includes holdings such as Brazilian real-denominated debt, rose to 287.9 billion yen from 45.3 billion yen in January, according to Nomura’s Web site. Initial jobless claims in the U.S. fell to 623,000 in the week ended May 23 from 636,000 in the previous week, the Labor Department reported. The median forecast of 41 economists surveyed by Bloomberg was for a decrease to 628,000. Orders for durable goods meant to last several years gained 1.9 percent in April after the previous month’s 2.1 percent decline. The median forecast of economists in a separate Bloomberg survey was for a 0.5 percent gain. The New Zealand dollar reversed declines after S&P raised the outlook on the country’s AA+ sovereign debt rating to “stable” from “negative,” saying today’s national budget showed the “government in sound position.” The currency advanced 1.5 percent to 62.37 U.S. cents and rose 3.2 percent to 60.45 yen. Australia’s dollar gained 0.7 percent to 78.14 U.S. cents and 2.4 percent to 75.71 yen. The yen also fell against the euro as the Nikkei 225 Stock Average reversed earlier losses to gain 0.1 percent, boosting demand for riskier assets. Equity Markets “Equity markets of emerging economies, including Asia, are holding a relatively firm undertone, which means risk appetite is still reasonably strong,” said Akira Takeuchi, a Tokyo-based currency dealer at Chuo Mitsui Trust & Banking Co., a unit of Japan’s seventh-largest banking group. “The yen will be sold against higher-yielding currencies.” Japanese retail sales fell for an eighth month in April, reducing the appeal of the nation’s currency. Sales slid 2.9 percent from a year earlier after dropping a revised 3.8 percent in March, the Trade Ministry said in Tokyo. The pound dropped from a six-month high against the dollar after Bank of England policy maker David Blanchflower told the London-based Times there may be “many false dawns” for the nation’s economy. Blanchflower’s View Blanchflower, who is leaving the Bank of England’s rate- setting Monetary Policy Committee this week, told the Times it’s “pretty hard to see anything very strong for 2010.” Britain’s Chancellor of the Exchequer Alistair Darling predicted last month the U.K. economy will grow more than 1 percent next year, after contracting 3.5 percent this year. Sterling slid 0.2 percent to $1.5920 after touching $1.6085 yesterday, the highest level since Nov. 5. The pound weakened 0.4 percent to 87.04 pence per euro. The euro rose the most in three weeks against the pound amid growing expectations for a rebound in the 16-nation economy. An index of executive and consumer sentiment in the region increased to 69.3 in May, the strongest since November, from 67.2 in April, the European Commission in Brussels said. The dollar traded near a one-week high against the euro earlier on speculation General Motors Corp. may file for bankruptcy this week, renewing demand for the relative safety of the U.S. currency. GM Bankruptcy A GM bankruptcy filing became almost certain after the world’s largest automaker failed yesterday to persuade enough bondholders to take equity in a streamlined company in exchange for $27 billion of debt. The debt-for-equity swap offer by GM failed to win the required 90 percent approval of bondholders by the time it expired. “GM’s insolvency looks practically inevitable, which would likely cause risk aversion,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “This could spark buying of the dollar.”

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